Will US dollar gain on US GDP?

Philip McHugh December 21st 2017 - 2 minute read

  • UK to release public sector borrowing figures
  • US GDP to reach three-year high?
  • Canadian Inflation expected to rocket

Pound lower after confidence data

Sterling dipped slightly on Thursday as the UK’s GfK consumer confidence index declined unexpectedly, and the UK’s public borrowing figures could inspire further losses.

The Office for National Statistics (ONS) will release the UK’s latest public sector borrowing figures this morning, with analysts predicting that the public deficit will have widened again in November.

However, should the government have borrowed less than expected to balance the book last month then it may bolster GBP, as it helps the UK government remain on target to reduce the deficit this year.

The Office for Budget Responsibility is currently expected to revise public sector borrowing down from its £58.3bn forecast for the 2017/18 financial year, with economists predicting that the nation’s deficit could be up to £8bn lower.

Buoyant US GDP forecast  

The US will publish its final reading for third quarter GDP later today, with economists forecasting that it will confirm that economic growth rose from 3.1% to 3.3% in the three months to September.

If confirmed, this will mean that the US economy grew at its fastest pace in three years in the third quarter.
This also places growth above Donald Trump’s target rate of 3% for the second consecutive quarter, something that is likely to be welcomed by the President.

The previous GDP estimate attributed the faster-than-expected growth to government spending and both non-residential fixed and private inventory investment.

Markets are hopeful that the accelerated pace of economic growth will also support further monetary tightening from the Federal Reserve in 2018 despite inflation remaining stubbornly below target.

Canadian inflation to surge?

Canada is set to publish its latest CPI data later this afternoon and the Canadian dollar is poised to rocket if inflation jumped last month as expected.

Economists currently forecast that inflation will have leapt from 1.4% to 2% year-on-year in November, quite a sizeable jump in price growth, which will see inflation reach its highest levels since February.

The jump in inflation will help validate the Bank of Canada’s (BoC) decision to raise interest rates twice in 2017 and may prompt the bank to strike a more hawkish stance over the possibility of further rate hikes in 2018.

However, some investors are likely to remain wary about the jump amid fears that inflation has been propped up by volatile items as core inflation is expected to retreat from 0.9% to 0.8%.
Upcoming Data

Thursday 21st December 2017

09:30               GBP Public Sector Borrowing
13:30               CAD Inflation
13:30               USD GDP
15:00               EUR Eurozone Consumer Confidence

Written by
Philip McHugh

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